Black & Decker shatters record for quarter, year

4th-quarter profit rose 19%, to $1.31 a share

Black & Decker Corp. said yesterday that strong power-tool sales produced fourth-quarter net earnings of $115.1 million, a 19 percent increase over the $98.1 million in the comparable quarter of 1998.

The Towson maker of power tools, hardware and home-improvement products reported diluted earnings per share of $1.31, up from $1.10 in the fourth quarter of 1998. Sales in the quarter were $1.35 billion, up 6 percent from $1.27 billion.

"Power tools and accessories had excellent results with an 11 percent sales increase and a 27 percent increase in operating profit for the fourth quarter," said Nolan D. Archibald, the company's chairman and chief executive officer.

The company, which set fourth quarter and annual earnings records, beat Wall Street analysts' expectations of $1.26 by a nickel. Black & Decker shares closed at $39.75, up 75 cents, on the New York Stock Exchange.

"I thought it was a very good quarter," said James C. Lucas, an analyst for Janney Montgomery Scott. "This company has laid a very solid foundation to achieve its goal of consistent and predictable growth."

Black & Decker's fourth-quarter comparisons were helped by nonrecurring items in the fourth quarter of 1998, including a $9.6 million restructuring charge. Excluding one-time items earnings per share increased 19 percent over the fourth quarter of 1998.

The company's strong power-tool results more than offset a poor fourth-quarter performance by its hardware and home-improvement segment. Sales declined by 2 percent in that segment because of lower-than-expected sales of Kwikset locks.

Operating profit fell slightly as well, because lower earnings at Kwikset offset higher profits for Price Pfister plumbing products. The company's fastening and assembly systems had a strong quarter, with sales up 4 percent and operating profit up 11 percent.

For the year, Black & Decker reported record net earnings of $300.3 million, or $3.40 per diluted share, compared with a net loss a year earlier of $754.8 million, or $8.22 per share -- the result of restructuring charges and a write-off of good will.

Without the write-off, restructuring charges and gains from the sale of businesses, Black & Decker's 1998 net earnings would have been $246 million, or $2.63 per share. Sales for the year were $4.52 billion, down 1 percent from $4.56 billion partially because of the loss of revenue from divested businesses.

The company credited higher sales, lower restructuring expenses and productivity improvements for the 1999 results.

"Sales grew above our targeted range for the quarter and the full year, led by the excellent results from our power tools and accessories group," Archibald said.

In 1999, the company's power tools and accessories segment reported a 9 percent increase in sales and a 29 percent increase in operating profit. The most substantial increases in sales occurred in the United States, but Europe and other regions reported modest sales growth in the fourth quarter, the company said.

Sales of hardware and home improvement products rose 4 percent for the year, led by a 6 percent growth in Kwikset locks. But operating profit fell slightly. Fastening and assembly products posted a 7 percent sales increase and a 10 percent operating profit increase in 1999.

The company said its annual return on sales, excluding one-time items, grew by more than a percentage point to nearly 12 percent. Improvement in the company's margins helped boost earnings per share growth beyond the company's goal of 15 percent. Free cash flow for the year was $242 million, 21 percent higher than the company's $200 million target.

Lucas, the Janney Montgomery Scott analyst, increased his projection for 2000 earnings by a nickel, from $3.85 to $3.90. "I think they are in good shape going forward," said Lucas, who has a "buy" recommendation on the stock.

"This is the Rodney Dangerfield sector," Lucas said. "There are strong fundamentals and management is doing things right. But people are not committing new money to this sector."

Nicholas P. Heymann, a Prudential Securities analyst, said he sees a buying opportunity. "It's going to be 82 bucks in the next twelve months," he said. "The stock is the most mispriced stock I've seen in five years."